“Giving money and power to government is like giving whiskey and car keys to teenage boys.”
So says P.J. O’Rourke, in his inimitable style. But O’Rourke is a humorist and not an economist. It is his job to be funny – not to tell the truth. After all, he might equally well have said that “giving money and power to BUSINESS is like giving whiskey and car keys to teenage boys”.
Democracies have conflicting opinions on how to spread money and power around. To put it too simply, Liberals think that more money should be funneled to government and private industry should be regulated; Conservatives think that money should stay in private hands and business should be self-regulating.
Are Conservatives right? – Yes and no.
Capitalism works when winners win and losers die. Successful businesses are better and stay better. The race is unending with customer loyalty only going so far; Walmart prospers, Woolworth perishes. Southwest waxes, Pan Am wanes. Yahoo sinks, Google swims. And in this competition the ‘fittest’ survive, resources are used efficiently, the economy expands, wealth is created and the customer benefits from a plentiful supply of better/cheaper products.
And when it works, as it mostly does, it is the most effective philosophy.
But what happens when you remove the death threat? What happens when companies become too big to fail? What happens when there are no rules? You end up with the financial industry. Too few big players, behaving badly and government looks like a paragon of fiscal efficiency in comparison.
Perhaps, if government had been involved, the situation might have been worse, you might say. Fair enough – so let’s look at health care.
First ignore the chorus of congratulation crowing that we have the best healthcare system in the world and dig into the numbers. Other developed countries spend about 10% of GDP on health, we spend 17%. Why? There are many culprits but government isn’t one of them. Medicare spends 3.3% of it’s budget on administrative costs, private insurers spend 8.9% (16.7% when you add in profits). Give a dollar to government and you get 96.7 cents of healthcare, the same dollar buys you 83.3 cents worth in the private market.
Government isn’t always so frugal. One look at military appropriations will illuminate that. But it isn’t government, it is politicians who pass appropriations bills. Let me explain. Government is a large organization with thousands of employees – but decisions on how much money to spend and who gets it, are only made by the 535 in Congress; who need money to get elected. Money which business is happy to give them.
If money was removed from politics I guarantee that procurement costs would go down. It seems incredible, but politicians have made it impossible for the Government to negotiate drug prices. But not so incredible when you consider that ‘Big Pharma’ has spent $2,146,551,331 on lobbying since 1998 ($2 TRILLION!)
And what happens to politicians after Congress? Some retire back to the farm, but most nose up to the corporate trough. It is clear that their is little daylight between the interests of politicians and corporate executives.
What P J O’Rourke should have said is that giving power and money to POLITICIANS or CORPORATE MANAGEMENT is like giving whiskey and car keys to teenage boys.